How to budget for your child’s education

Jessica Satherley
How to budget for your child’s education

Though New Zealand state schools are “free”, parents will spend approximately $36,455 getting one child from primary through to the end of high school, education support providers ASG say.

Private school over that same period costs about $323,000, and a state integrated school is estimated tocost about $94,000, according to ASG’s calculator.

REDnews spoke to an authorised financial advisor and a budgeting expert to delve into the intricacies of funding school-aged children.

“Most New Zealand children attend state schools,” according to the New Zealand government website.

“State schools are funded by the government and the education is free for domestic students up to 19 years of age.   

“However, parents usually need to pay for things like school uniforms, stationary, exam fees, and some course-related costs,” it says. 

There are also school trips, sports events and other activities that are not included, which subsequently cost tens of thousands of dollars over their school life. 

“The earlier you start saving, the easier it is. Time frames are short for kids but see what is affordable,”Westpac Authorised Financial Advisor Marc Proctor says.  

“A dollar saved today is better than a dollar saved tomorrow,” he said.

Budgeting expert and Director of Westpac-Massey Fin-Ed Centre, Dr Pushpa Wood, advises to calculate your expenses on a monthly basis and see if you can minimise your expenses. 

"Can you be entrepreneurial and speak to relatives?” she says. 

“Instead of spending $200 on Christmas presents, you and your relatives could contribute to an education fund.   

"If you’re on an income which is already putting stress on your budget, then you need to plan ahead.   

“But even if you’re not on a tight budget, your expenses will still grow as the child grows.   

"Don’t treat the birth of a child and their education as an ad hoc expense, it’s not compromisable and you need to find the means to fund it," Dr Wood says. 

Only 5% of New Zealanders attend private schools, according to government figures, and just over 10% of students are enrolled in State-integrated schools. 

State-integrated schools are usually run by a religious faith or use other education methods such as the Montessori system.  

“If you decide you want a private education for your child, think about ‘how am I going to fund that’,” Proctor says. 

“Explore scholarship options and think about the cost of boarding too. 

“Some people have to use a boarding school, if for example a farming family live on a rural location far away from the school. 

“Even in the state system boarding is expensive. Some people start a fund to save for education, it’s no different from an investment portfolio,” he said. 

“We would use a fully diversified unit trust and would reduce the risk profile closer to the time you want to draw down.    

"But before you start an education fund, you have to weigh up is how much debt you have and think about your own retirement. It’s best to pay off debt first. 

“The general advice is to pay off your mortgage first, but some people do look at both depending on priorities,” Proctor says. 

Dr Wood started saving for her daughter’s education when she was born. 

“For my daughter I set up auto payments since her birth, so each salary payment would have a small amount that would go through to a fund for her university. 

“It was untouched until she was 18 and there was enough for her to use for university without having to borrow anything,” Dr Wood said. 

“You can also encourage grandparents and uncles and aunties to contribute to the fund on birthdays and Christmas too.   

“You can give a token gift but also give them a deposit slip as a present to say it’s for the education fund,” she says. 

If you’re thinking about sending your child to private school, Dr Wood says that you need to look at why you’re interested in that school. 

“Is it just to keep up with the Joneses or is state school not going to provide something specific? Therehas to be a reason for that extra cost,” she says. 

Other ways to save money on school necessities such as school uniforms is to buy second hand. 

For individual advice on your personal financial situation, speaking to an authorised financial advisor is recommended. 

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